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prices rising by nearly 15%. In addition to other factors inflation was fuelled by an increase in loans and advances of 45% and of 27% in M3. A sound mechanism to influence the credit base has so far eluded this government, like many others. We approach the subject with extreme caution, but at least one new technique of intervention in the market was tried, not unsuccessfully, during the year, and the steady improvement of the Government's statistical services should give us a more secure basis from which to consider this very difficult problem.
25 The speculative boom in land and property prices
which caused widespread concern in 1980 eased in the second half of 1981 under the influence of high interes t rates and a better balance between supply and demand. By the end of the year on average property prices had dropped at least 30% from their peak and some land prices as much as 60%, and the decline may well go further. far this adjustment, which I consider healthy, has occurred without financial upheaval, though with a marked drop in share prices.
So
6. Generally speaking most economic indicators ended the year in a healthier state than they had begun it. Nevertheless the work-force, industrialists, developers and property owners alike had to absorb some sharp and unpalatable adjustments beneath the generally favourable surface conditions.
Svea Protectionism
27.
Of course Hong Kong's prospects in 1982 will be dominated by the course of the United State's economy. But apart from this protection, whether in Europe or -the US, is the major uncertainty hanging over Hong Kong with the series of bilaterial agreements with the US and EC falling to be negotiated before the end of the year. The most virulent exponents of protection are in the EC,/but anything conceded to the EC/must subsequently be given also to the US, whose market accounts for more than 40% of Hong Kong's exports. The arguments produced in 1977 in favour of easing competition for European producers by still further restricting imports from Hong Kong and developing countries are now dis- credited, and Hong Kong sees itself cast as a whipping
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